April 02, 2026
Popular policies against populists
A good idea: Austria cuts VAT on food in half.
To the point!
Germany is in urgent need of reform.
Political disenchantment in Germany keeps deepening. The sense that “those at the top” are out of touch and blind to ordinary people’s worries is fueling support for populist parties. These parties, in turn, promise the moon without explaining how they would pay for it. For the first time in three years, fear of social decline and poverty has once again – narrowly – risen to the top of Germans’ list of concerns (see fig. 1).
Fig. 1: Top-5 Worries of Germans
December 2025 | up to three responses
The current wave of politics-bashing in Germany has taken on grotesque proportions. Over the course of my life, I have met many politicians. In almost all cases, my impression was of people with integrity, driven by a sense of purpose. The stock caricature of the grasping, self-serving politician does not square with my experience.
When was the last genuinely popular policy in Germany?
Still, there is something to the idea of a growing disconnect between elected officials and voters in Germany. It hardly helps that, with numbing regularity, leading government officials claim Germans have turned lazy – or suggests reining in individual choices such as part-time work.
It is not as if Germany had no need of reform. Quite the opposite. But reforms only stand a chance of succeeding if policymakers secure at least some degree of public buy-in. When was the last time the German government implemented a measure that was broadly popular? One example is the Deutschlandticket, a nationwide flat-fare pass for local and regional public transport, introduced in 2023. By the end of last year, almost 15 million people were using it, even though the price has risen by 29% since its inception. So what could be done now to give voters a sense that “politics” is actually tackling something on their behalf?
A look across the border
One promising idea comes from Austria. There, the government is cutting the value-added tax (VAT) on basic foodstuffs in half, to 5%, as of 1 July. The primary goal is to finally bring still-abovetarget inflation under control. At the same time, everyone who buys food stands to benefit – which is to say, everyone. The gains are particularly significant for low-income households, a group disproportionately drawn to the political fringes.
Fig. 2: Price level: foodstuff and overall inflation
2020=100
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In Germany, food prices have risen by 36% since 2020, much more than overall inflation (see fig. 2). And it is well established that households with lower incomes devote a larger share of their disposable income to food (see fig. 3). Cutting VAT could provide relatively well-targeted relief to those most in need. Could such a measure command majority support? In 2023, none other than Markus Söder , the influential and ambitious prime minister of Bavaria, floated a proposal along these lines.
Abb. 3: Expenditure by income category
EUR per month, 2022
Fig. 3: Expenditure on food, beverages and tobacco as a share of net household income, by income category
The devil is in the details
Putting such a reform on the table is easy – the complications lie in the design. In Germany, the standard value-added tax rate is 19%. Most food products are already subject to a reduced rate of 7%. To make a difference that people actually feel, some selected items would have to be fully exempt. Which ones?
Ideally, these would be unprocessed products that support healthy diets and benefit the broader economy: grains, fruit, vegetables, pulses and similar staples. Given the largely negative environmental footprint of livestock farming, meat might reasonably be excluded. Whether that would get past Söder, who likes to present himself on social media under the hashtag #söderisst (“Söder eats”) as an unabashed meat lover, is another matter. A welcome side effect could be a shift toward healthier eating. Diets heavy in meat and ultra-processed or sugar-laden foods are among the main drivers of premature death worldwide .
How could such a tax cut be financed? A first step would be a sugar tax, similar to the levy that the U.K. has introduced with some success. Other “sin taxes” on harmful products such as tobacco and alcohol could play a role as well. Or another idea from Austria: higher taxes on n on-recyclable plastics.
A further question is whether such tax cuts would actually reach consumers. Or would this end up like the reduced VAT for the restaurants in Germany, which was introduced this year and largely fattened profit margins for restaurant owners? To avoid that outcome, policymakers could require large retailers to document how much of the tax cut they pass through to customers. The high degree of concentration in German food retailing makes oversight more feasible there than in the highly fragmented restaurant trade.
Dr. Moritz Kraemer, Chief Economist / Head of Research at LBBW
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